Your currency will never reach R$1, the main trap of altcoins
With the recent increase in demand for alternative currencies such as Shiba Inu (SHIB), many people are misled into thinking that it could reach 1 Real, or close to it, and this could be the main pitfall of altcoins.
According to a study by Bacancy Technology, Shiba Inu became the third most searched cryptocurrency on Google in 2021.
What is not observed by them is the amount of coins in circulation, because while Bitcoin has about 19 million coins at the moment, SHIB has 550 trillion, according to data from CoinGecko.
Therefore, if each SHIB is worth 1 Real, its market value will be 550 trillion Reals. This would turn it into a cryptocurrency 83 times larger than Bitcoin itself, today with a market value of BRL 6.57 trillion.
“Arbitrary choice” of Bitcoin supply
As Bitcoin was the first cryptocurrency to establish a total supply of currencies, it is important to analyze the reason for the choice. According to the creator of Bitcoin, Satoshi Nakamoto, the explanation about the maximum number of 21 million units that was chosen so that each BTC had a value close to the value of traditional currencies, such as Real, Euro and Dollar.
“[…] I wanted to choose something that would make prices similar to existing currencies. […] For example, if 0.001 [BTC] is worth 1 euro, so it might be easier to change where the decimal point is displayed, so if you had 1 Bitcoin, it now displays as 1,000 [Euros] and 0.001 [BTC] is displayed as 1 [EUR].”
In other words, 12 years ago Satoshi was already aware of the psychological effect caused by the price of the coin, which is mainly dependent on the total number of coins. Also, as Bitcoin contains 8 digits after the comma, the creator of Bitcoin also explained that we could use a decimal place below it, such as mBTC or satoshi (smallest unit of a BTC) if its price went up.
The main trap of altcoins
As many people make their first contact with a coin through its price, sometimes the total number of coins ends up being forgotten. A coin that costs 1 cent is much more appealing than one that costs R$10,000.00, even if they are identical, except for the total number of coins.
That said, the strategy used by many cryptocurrencies, memes and altcoins, is to create an absurd number of currencies to make them look cheap and with room for growth, especially when compared to others that have a lower supply.
In the table below we show what the price of the largest cryptocurrencies would be if their total number of coins in circulation were equal to that of Bitcoin, exactly 18,859,493 coins at the time of this writing:
By standardizing the number of total coins in circulation, we now have coins like Doge and Shiba costing around 10,000 reais. Note that despite both having the same market value, today one is traded at R$1.50 and the other at R$0.000037.
On the other hand, other currencies would have very different prices, such as XRP with a value of 2,500 times greater, R$ 15,580. Just like Cardano with an increase of 1,700 times, with a price of R$19,091 for each ADA. Reinforcing, nothing has changed other than the total number of coins, coin owners still have the same percentage share as before.
Another point is that today with 1,000 reais you buy 2.6 million SHIB, a number that would drop to 0.092671620 SHIB with this standardization. It doesn’t look all that attractive, although it doesn’t change anything.
Looking from this perspective, the appeal of this device used by hundreds and thousands of altcoins becomes clear. It is likely that someone will buy a penny than a $10,000 coin due to lack of knowledge or because of the subconscious, without even researching the fundamentals of both.
Don’t fall for this one (or its reverse)
It is also worth noting that a few currencies use the counter strategy. By creating a very small number of coins, they give the impression that they are bigger than Bitcoin.
An example is Yearn Finance (YFI) which has only 35,692 coins in circulation, costing 192 thousand reais each. Following the standardization used above, YFI would cost 364.21 reais per unit if it had a total of 18,859,493 currencies like Bitcoin.
Although the choice of the number of coins by some developers has the same objective as Satoshi, of finding a number close to reality for sheer convenience, it is more than clear that others abuse it in bad faith.
Finally, remember that the price of an altcoin coin, and Bitcoin itself, is simply the result of its market value divided by the total number of coins in circulation.. So, don’t get carried away by forged numbers whose sole purpose is to trick your brain.
